Designed specifically for busy professionals who want to retire early—with enough financial security to last a lifetime—Louis Llanes wrote Financial Freedom Blueprint to walk readers quickly and easily through everything they need to know to speed up that process.
With specific tips on lowering tax bills and choosing a solid financial advisor, Financial Freedom Blueprint delivers immediately, providing concrete value that can start accelerating anyone’s financial freedom today. I recently caught up with Louis to learn more about the book.
What happened that made you decide to write the book? What was the exact moment when you realized these ideas needed to get out there?
I decided to write this book because I have been working in the investment management field advising clients, managing money, and analyzing investments for over two decades and I notice that the advice and common wisdom provided by large Wall Street firms were not independent and unbiased. I set out to provide a framework to help people make smarter financial choices.
My goal is to provide what I consider to be more optimal advice all in one place. I often informed people about many concepts often and this led me to put it into a book that can easily be shared to give people a jump start with financial planning and successful investing.
What’s your favorite specific, actionable idea in the book?
Investing successfully is like great cooking. It requires a recipe (a formula) that leads to tasty food in a consistent way. Your stock recipe is simply a checklist to help you stay on track. If you follow the recipe, you will lean the odds in your favor to pick winners. Not every stock will be a winner, but if you combine the recipe with risk management and portfolio construction protocols, then you will have a long-term winning recipe.
I want to share a formula I developed for trading and investing in stocks. This formula gives you the tools to find the right stocks, where to focus your capital, and how to invest profitably. It is a further refinement of the stock that meets the ADP Criteria.
If you are like most people, you want to grow your money in stocks, but you’re worried about losing money. I developed this formula and have been successfully managing millions of dollars for clients and myself. Over time, this philosophy has helped me avoid stocks that are too risky, and increase the probability that my stock investments will make money. This strategy, combined with smart diversification, can help you improve your growth and protect your money.
Here is the formula:
3 Cs + 3 Ps + SA
The 3 Cs and the 3 Ps give you the ammunition to find what stocks to focus on for investment. The “SA” part of the formula explains how to trade the stocks.
What’s a story of how you’ve applied this idea in your own life? What’s it done for you?
One of my biggest “aha” experiences happened as the dotcom bubble developed and busted. It was early in my career at that time, and my method for managing investments was primarily fundamental analysis. Fundamental analysis is a method of assessing the profit potential of a company by analyzing the business economics. Some examples of fundamental analysis are assessing the value of assets, cash flow, and growth rates, and understanding customer trends.
Before the dotcom bubble busted, the fundamental method of managing stocks was successful. And in the long run, it remains a very profitable method. But as the bull market in stocks became more speculative, there were little to no values in the stock market from a fundamental perspective. But companies in the internet industries that had no earnings were skyrocketing. Investors clamored over them while our stocks went down. Warren Buffett’s Berkshire Hathaway, a fundamentally managed company, also fell over 50% in value while the dotcom stocks rocketed to the moon. Eventually, the overpriced internet stock crashed and the fundamentally sound stocks rallied to new highs in price!
I learned that the markets can become completely irrational and that in order for you to have good performance, you have to be able to manage risk and you have to be able to understand that markets will overshoot to the upside and overshoot to the downside.
This is when I started incorporating and combining technical analysis with fundamental analysis. Technical analysis is a method to analyze the supply and demand for securities directly. This is important because the market prices give you clues about potential moves in investments before the fundamentals change because prices tend to lead fundamentals. You can only make money when the market recognizes value.
Combining fundamental and technical analysis has allowed me to better protect capital during bad markets and to get a reasonable return over the long run. As a result, my firm has been able to help investors retire even though after the.com bubble the markets gyrated up and down by 50% without going to new highs for over a decade.
Having a good mixture of fundamental analysis based on sound economic principles combined with solid risk management and technical analysis can improve investor outcomes.